Elon Musk (@elonmusk) now has 93.6Million followers and his concerns around Twitter’s bot problem has escalated. The Twitter acquisition is now in doubt as Musk says “..This deal cannot move forward..”.
In a recent filing by Twitter, they suggest their bots make up less than 5% of the mDAUs (Monatizable daily active users), however, the experience of many, including Musk, suggests the number could be much higher.
In his latest reply to a post by Teslarati, Musk suggests the number could be as much as 4x higher and that 20% may not even be the real number.
Musk goes on to say that the offer was based on Twitter’s numbers being accurate. Typically the value of social media companies are a combination of the active users base (distinct from the total accounts on the platform).
Twitter’s stated user count is 229 Million mDAUs, but 5% (around 11.5M) less brings that to 217.5M. If the 20% number is accurate, then the actual number could be 91.6M less, leaving just 137.4M, leaving the company considerably less valuable.
The accuracy of these numbers depend on how you determine what is a real account and one that could potentially pay you, versus a bot account, or automation account that would never be a monetizable eyeball.
The earnings of the company, talent, patents and other assets also play into the value of a company, but a large percentage is assigned to the value of the userbase, a symptom of the total active users (aka humans).
Twitter’s CEO Parag Agrawal has posted early today, a quite lengthy thread on the issue of bots on the platform and if you have time, I encourage you to read the entire thing.
After facing public criticism from Musk, this tweet appears very defensive, suggesting that external assessment of the % of bots on Twitter is not possible. Given most users on Twitter post publicly, this seems like a stretch to imagine you need insider information to determine the veracity of the bot problem.
Coincidentally, Elon Musk also appeared via video on Episode 69 of the All-in-podcast, released today. During this interview he also voiced concerns about the bot problem.
After listening to him speak, along with his tweet above, this looks like one of two things. Firstly that he’s concerned that he’s overpaying for Twitter, given a potentially much smaller userbase. By highlighting an issue with bots, Musk could be leading up to a renegotiation of the offer for a much lower amount.
Secondly, he may be concerned less about the buyout offer, but more about the work required to build up the userbase as a private company.
The expectation is that Musk would take Twitter private, deal with the spam/bot problem, and the actual user number would be revealed. Imagine we’re down to 100M users, when he was expecting the starting point was 200M, the challenge to then grow the users to 500M and beyond is then substantially greater.
As this news spreads that the deal is potentially in doubt, watch the $TWTR share price today, it’s likely to get hit hard and with a reduced share price and Market Cap, the argument for a discount on the deal continues to grow.
What do you think? Will the deal fall through, go through at a lower price? It seems incredibly unlikely the deal continues and executes as is. Leave your thoughts in the comments below.